Morning Commentary

Dec corn up 1 at $3.8875

Nov beans up 1 ¾ at $9.355

The DOW is up

USD is stronger

Crude oil up $.10 at $56.07

Good morning,

Corn  prices remain in a very tight range. Since the middle of last week, we’ve essentially traded five cents higher and five cents lower, just very little movement. The trade continues to take a wait-and-see approach towards final U.S. production, South American weather, Chinese trade. There is some rough weather being forecast next week for some areas of the U.S. that still have corn in the fields. Who knows how it ultimately plays out, but as of right now, there’s a powerful autumn storm in the mix for next Wednesday or Thursday. Several sources are calling for heavier rains and perhaps a foot of snow in some parts of Minnesota, parts of Iowa, Wisconsin, etc…

Soybeans  bulls are talking about the production uncertainty associated with the bushels that still remain in the fields. There are some bouts of cold and rough weather forecast in the days ahead so the downside could stay fairly well supported. Bears are pointing to continued U.S. harvest pressure and improved moisture in South America.

The USDA’s latest Livestock World Market and Trade report projects Chinese pork production to decline another 25 percent in 2020. University of Missouri’s Scott Brown says that presents a tremendous market opportunity for the US pork sector. “Back in 2015 the Chinese produced 56.5 billion metric tons of pork,” he says. “But from 56.5 to 34.8 billion metric tons in 2020 – and that’s why everybody’s looking at what’s the opportunity for trade.” On the demand side, the USDA projects China’s pork imports to increase 35 percent next year. Brown says the U.S. is in a great position to capitalize on China’s needs – especially as US pork production is expected to grow another 4 percent in 2020. “The absolute growth in the United States pork production in 2020 likely exceeds the growth in everybody else excluding us and the Chinese,” he says. “It keeps reminding me we’ve got to be able to move some of that product outside of the United States, I believe – if we want to try and keep prices at some reasonable level.” Brown says China is also likely to turn to the EU and Brazil to meet their pork demand needs. (Source: Brownfield Ag News)   

Ethanol industry groups expressed their disappointment with the news that the Brazilian government amended the recent August 31 rule that raised the quota on U.S. ethanol imports under the tariff rate quote (TRQ) from 600 million liters per year to nearly 750 million liters per year. The TRQ regulates the threshold of ethanol that can be imported into Brazil without triggering a 20% tariff. In a joint statement from Growth Energy, the U.S. Grains Council, and the Renewable Fuels Assn., the groups said the action represents “a step backwards in Brazilian government claims that it is an advocate of free markets.” In the statement, the ethanol supporters noted that for more than 15 years, Brazilian ethanol industry leaders lobbied the U.S. government to drop the tax on imported ethanol, saying that it believes in a two-way street and that Brazil would lead by example and eliminate barriers to renewable, clean fuels. (Source: Feedstuffs)

America is sitting on a mountain of uneaten bacon. More than 40 million pounds (18,000 metric tons) of pork bellies, the cut used for bacon making, were sitting in refrigerated warehouses as of Sept. 30, according to U.S. government data released Tuesday. That’s the most for the month since 1971. The overhang came after a build up in the American hog herd. Pork output surged over the summer months and through September, said Dennis Smith, senior account executive at Archer Financial Services Inc. Hog producers started building up their herds in anticipation of more demand for meat imports from China, where African swine fever has killed millions of pigs. The U.S. herd swelled to 77.7 million head. as of Sept. 1, a record for the month and the highest since 1943 considering all periods, the most recent U.S. Department of Agriculture data show. So far, that’s mostly led to an excess for U.S. supplies. But the glut could be short-lived if recent Chinese buying is any indication. Export sales of American pork have soared to weekly records, buoyed by purchases from the Asian country. China mostly buys carcasses, which they then process domestically, rather than individual cuts of pork. Of course, the belly goes over with the whole hog. “The theory is, if we continue to export split carcasses to China, it’ll create a belly shortage,” Smith said. (Source: Bloomberg)

Caterpillar yesterday reported disappointing third-quarter earnings and slashed its full-year outlook in what some see as a warning sign for the overall global economy. The construction and manufacturing equipment titan, viewed as a bellwether for global industry, revealed a -6% drop in sales and an -8% drop in profit per share in the third quarter. Caterpillar produces so much of the world’s equipment that a decline in its business often indicates a broader slowdown in construction and factory activity. Weaker demand for its products typically means people are building and manufacturing less, which doesn’t bode well for global economic growth. The company blamed the sales decline on dealers slashing inventories by $400 million last quarter, after raising them by $800 million in the same period of 2018. CEO Jim Umpleby warned that pattern is likely to continue. “In the fourth quarter, we now expect end-user demand to be flat and dealers to make further inventory reductions due to global economic uncertainty,” he said in the earnings release. Caterpillar’s sales in Asia-Pacific declined -13% in the third quarter mainly because of the lower demand in China, the company said. (Sources: Business Insider, CNBC)


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